Shanzai Vs. Patents: Future Stock

Tip of the hat to Adam Minter of Bloomberg/Shanghaiscrap.com, who gave an even-toned but illuminating presentation on Chinese "E-waste" recycling at the EScrap Conference here in Orlando. I hope he will put it online, though it would be missing his verbal critique.

Adam listened to my theory of patents... That the USA and Europe have been so important a market to sell INTO that it was relatively safe, ten years ago, to let Taiwanese and Chinese subcontractors and contract manufacturers, such as Foxconn and Wistron, make everything you sell. An American gadget company, like Dell or HP or Apple, is in many more ways a retailer - selling "shelf space" inside a box with their logo - than a traditional "manufacturer". Even Japanese companies, like Sony, are letting China's contract manufacturing giants make the TVs.

My theory goes, that as the "Dell" box contains a Frankenstein of Corsair, Seagate, Intel, etc. parts, sewn together by Foxconn assemblers, that they increasingly rely on the patent to remain part of the equation. The patent enforcement was access to American and European buyers. If you violate our patent, we can stop letting you make our products, and without Dollar and Euro holding customers to sell to, mutually assured destruction would ensue. My theory then says that an important milestone has been reached - China is buying more new products than America is. While the USA market remains important, the leverage of a major OEM brand is declining. Selling copyright-infringed or knockoff products solely in Shanghai, Beijing, Mumbai, etc. is not the "desert niche" it was a decade ago.

My question to Adam was whether the CCP (Chinese Communist Party) would step in, and wield their own power of patent enforcement. How would that power be used? Would CCP become a member of AGMA, or a power broker? Recalling how HP gave $6M to the Chinese EPA in 2002, and how it resulted in seizures of printer cartridges, ink cartridges, printer repair shops, and repairmen, could a CCP-AGMA bond become a future sci-fi villain? Or would the CCP "forget how to speak English" and ignore western patents, letting their own private companies wield the free market power once enjoyed by USA brands?

This isn't an exact translation, but my understanding is that in the same way Westerners have a "soft spot" for underdogs, that Chinese culture has an applauding respect for "one-upmanship" in "improving" a great product made by another. If I could improve on da Vinci's Mona Lisa, I might share a space at the Chinese Louvre. If the "knock off" is an improvement - like the "Iphone V" discovered in Shanghai (an unauthorized copy which actually improves on any Apple Iphone sold before it), that the reaction among the Chinese public is like a rock audience to a guitar riff.

Future of Stock: If the public in China do not hold corporate stock in the OEMs, they are unlikely to care whether a contract manufacturers "forgets english" and marches off to its own drum. Even the CCP would find it hard to enforce against Shanzai. That ultimately means that America needs to stay rich in order to leverage China's manufacturer sector. And the more America outsources its manufacturing, the more difficult that will be.

I for one welcome the new Shanzai overlords. If taking "cores" and used product to refurbish to like-new and better-than-original, it means using fewer natural resources, and producing less carbon, to make life better for more people. The more we shred product to prevent "gray markets" the more America shreds its wealth. A less wealthy America is less important a market to lose over a patent pissing match.

Cheap, reused goods, open new markets. Ford Motor Company had the best reply to Vance Packard - people learn to drive on used cars, and the more people learn to drive, the bigger the car market. Internet access in places that earn $3k per year is important to the future of American producers. Let Africa, India, China, Indonesia and South America have cheap used goods - we should sell ours to them. That is how the neighbors improve their houses, and the property values of my own house will go up with the neighborhood.